Chrysler, Ford report sales drop in US

Chrysler and Ford have reported double-digit drops in October sales, lagging rivals in a slumping US market.

02 November 2007

Chrysler LLC and Ford Motor Co on Thursday reported double-digit drops in October sales, lagging rivals in a slumping US market widely expected to remain under pressure into next year.

Chrysler, which also announced plans to slash one-fifth of its factory work force and cut four slow-selling models, posted a 12 per cent drop in monthly sales that was deeper than analysts had forecast.

Ford recorded a 13 per cent monthly decline, reflecting a cutback in low-margin sales to car rental agencies as part of its own ongoing restructuring aimed at restoring its US operations to profitability.

By contrast, Toyota Motor Corp snapped out of a quarter-long slump to post a slight gain in US sales, eclipsing Ford to hold onto the No.2 spot in the world's largest vehicle market.

Sales for industry-leader General Motors Corp were down almost 1 per cent for October, outperforming the weak market and allowing it to boost its share to almost a quarter of total sales.

Major automakers said the slumping US housing market, higher gas prices and wildfires in California had all combined to crimp sales in October despite signs that vehicle demand had steadied from an even rockier summer.

Toyota squeaked out a gain of less than 1 per cent, snapping a three-month streak of lower sales as showroom traffic in the Midwest and elsewhere offset a continued slump in California.

Honda Motor Co reported almost flat results, with October sales off 0.2 per cent. Nissan Motor Co Ltd bucked the downtrend to post an almost 9 per cent sales gain.

Overall industry-wide sales fell almost 3 per cent on an adjusted basis to 1.23 million vehicles, compiled data showed.

The Ford sales decline was largely in line with cautious Wall Street expectations. Ford said it had held retail market share around the 13 per cent level it has built into its turnaround plan.

For its part, Chrysler said its weak October results underscored the need for the sweeping cost-cutting it unveiled on Monday. The accelerated restructuring plan marked the first major strategic overhaul since the automaker was taken private by Cerberus Capital Management in August.

"We're seeing growing concern about the housing slump showing up in consumers' expectations about future economic conditions and that's showing up in auto sales," said Darryl Jackson, Chrysler's vice-president of US sales.

The October results showed the importance of sales in California for Japanese brands such as Toyota, which dominate sales in the most populous US state and the largest single market for new cars and trucks.

Nissan said there was evidence that retail sales had slowed in the last 10 days of the month, at about the time Southern California was hit by fires that drove some 500,000 people from their homes.

"The last 10 days were definitely slower," said Mark McNabb, Nissan's senior vice president for US sales.

On an industry-wide basis, McNabb said the US market appeared to be headed for a 2007 sales tally of about 16 million vehicles. That would mark a roughly 3 per cent decline from 2006 when sales totaled 16.5 million vehicles and mark the weakest result for the industry in almost a decade.

Even so, McNabb said there were signs the market had steadied after an unexpectedly weak July, when credit concerns undercut sales and raised concerns of an even deeper slump.

One still-debated question is whether the US market will recover significantly in 2008.

GM chief sales analyst Paul Ballew said the number-one US automaker was assuming that 2008 would be flat versus this year's depressed levels.

"Right now we're assuming it's going to be pretty much a replay," he said. "The industry will probably end up looking a lot like where we end in 2007."

By contrast, Toyota said it was still banking on a gradual recovery next year, although executives said that forecast would be reviewed in light of the weakness in key markets such as California and Florida.

Sales results for the major automakers were adjusted for an additional selling day in October compared with the same month a year earlier.

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